Harley-Davidson Earnings Plummet

Harley-Davidson's second quarter earnings dropped 91%, causing the iconic Milwaukee manufacturer to announce reduced shipments and lay-offs in the worst sales climate in modern history.

Second quarter net income was $19.8 million, compared to $222.8 million in the second quarter of 2008, on revenue of $1.15 billion compared to $1.57 billion from the same quarter in 2008. The primary cause was a 27.6% reduction in motorcycle shipments compared to last year. The company shipped 58,179 Harley-Davidson motorcycles in the second quarter of 2009 compared to 80,326 motorcycles shipped last year.

Harley sales were down worldwide 30.1% compared to a year ago, with a 35.1% decline in the U.S. and 18.2% internationally. That compares favorably to the industry-wide 48.1% decline for heavyweight motorcycles in the U.S. for the same period.

Because of the decline in sales, Harley reduced its 2009 shipment plans. They now plan to ship between 212,000 and 228,000 Harleys motorcycles in 2009, or 25 percent to 30 percent fewer than the 303,479 shipped in 2008. Previously, they'd planned on shipping between 264,000 to 273,000 motorcycles.

The reduced production means there will be lay-offs. The hourly production workforce is expected to be reduced by about 700 positions, with 300 more jobs being lost in the non-production, primarily salaried staff. That's on top of Harley's announcement earlier this year of workforce reductions totaling about 1,400 to 1,500 hourly production positions in 2009 and 2010 and about 300 non-production, primarily salaried positions.

"While the underlying fundamentals of the Harley-Davidson brand remain strong and our dealers' retail motorcycle sales declined less than our competitors, it is obviously a very tough environment for us right now, given the continued weak consumer spending in the overall economy for discretionary purchases," Harley-Davidson CEO Keith Wandell said in a statement.

Earlier this year, Harley announced a three-part strategy for navigating the worldwide recession and strengthening its operations and financial results. That strategy consists of: 1) investing in the brand; 2) creating the appropriate cost structure; and 3) obtaining funding to support the lending activities of HDFS (Harley-Davidson Financial Services.)

Harley announced consolidation plans for several factories in January, but has since determined that the operations in York, Pa. aren't currently competitive or sustainable. A study is to be undertaken to determine whether it can be made viable or whether to shutter the factory. A decision is expected later this year.

The company will introduce their 2010 models at its Summer Dealer Meeting later this month in Denver.